China’s Cosco Pacific has emerged as the only bidder for the Greek government’s 67% stake up for sale in the Piraeus Port Authority (OLP).
However, as has become the norm in Greece’s privatisation process, the state sell-off fund, the Hellenic Republic Asset Development Fund (TAIPED), on 12 January asked the sole bidder to table an improved offer in an effort to secure the
highest possible returns for one of the fund’s most prized assets.
Also, as had been expected for some weeks now the dragging out of the privatisation process of Greece’s largest port and the uncertainty this caused saw other interested parties lose interest, the most recent being APM Terminals. Cosco already operates Piraeus container terminals II and III under a 35-year concession agreement signed in 2009.
Though Cosco believes its bid is “particularly satisfactory” it was not caught by surprise by TAIPED’s effort to seek an improved bid. A few days before the unsealing of bids a Cosco official was quoted as saying: “Given the current domestic and international economic environment, as well as the concession contract that excessively favors the state, the offer is particularly satisfactory.”
The bidders have complained government tinkering has not only changed original conditions, but what is actually up for sale.
TAIPED has long stressed the aim is to maximise the price attained and the investment the preferred bidder will undertake to implement. Although the bid’s amount was not be published, it provides for investment of EUR296m in the first five years and another EUR50m over the next three, including improving the port authority’s own, terminal I which will pass to its control.
Cosco¹s No 3 official, cfo and Chinese Communist Party commissar Sun Yueying, is in Athens to close the deal, along with Cosco’s consultant, French investment bank Lazard. The Greek and Chinese sides can achieve an agreement, but not at a level much higher than that of Cosco’s original offer.
Outcome of the effort will not only determine this privatisation project but also the broader investment climate as well as the country’s bilateral relations with China. The two sides’ margin for convergence exists but is quite limited.
The improved offer TAIPED requested from Cosco will be assessed in a fund board meeting next week. However, no announcement was made as to an exact date, nor the original bid’s size, nor the level of the assessments by the two independent consultants, the Kantor-Deloitte consortium and American Appraisal Hellas.
In the absence of any other bids, TAIPED is using the assessments of its consultants as a yardstick and negotiating asset, which appear to lie behind the reason not to reveal their precise conclusion, even to Cosco. This strategy appears to have upset the Chinese side, which has waited over two years for the completion of the tender process.
Sources say that Cosco is prepared to raise its bid, but not much higher given that it sees OLP’s stock value has dropped well below its offer.
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